A corporation, with a December 31 year-end, sold all of its assets on November 30 (thereby resulting in a capital gain and refundable dividend tax on hand ("RDTOH")), and then immediately (on December 1) made a dividend payment of its net asset value. 9429465 suggests that the refund of RDTOH could not be included in safe income until the end of the year (December 31), so that the dividend would result in a partial capital gain on December 1, equaling the unrealized safe income related to the dividend refund ("DR"). Is this correct? CRA responded:
In the context of a situation as described in the question and to the extent that it is reasonable to consider that the DR contributes to the hypothetical capital gain in respect of the shares on which the dividend was received (assuming a disposition at FMV of the shares immediately prior to the dividend), the CRA would be willing to take the position that the DR receivable is to be considered in computing income earned or realized as of December 1.
Consequently, in such a situation, the taxes payable and not refundable in respect of the income arising from the sale of the assets will have to be subtracted from the safe income calculated for the period, as it is reasonable to assume that they do not contribute to the capital gain that would be realized on a share of the capital stock of the corporation.